ONGC MAY BID FOR SOME ‘UNVIABLE’ MARGINAL FIELDS
State-run Oil and Natural Gas Corporation (ONGC) may bid for some of the smaller fields it earlier surrendered as unviable following the unveiling of a new government policy to develop marginal oil and gas blocks.
The government plans to auction 69 marginal fields this fiscal year under a new policy that allows producers to sell gas at market price; share revenue, not profit, with government; and explore all forms of hydrocarbon with just one licence for the block.
These blocks include 63 discoveries made earlier by the ONGC, which didn't develop these blocks citing their unviability. But with pricing freedom given to the potential operators of the marginal blocks, DK Sarraf, chairman of ONGC, said some of these blocks may be viable.
“They were not viable then. But with a new policy, some of these may be attractive now. We will do the financial modelling again and wherever it's financially viable, we will also bid,“Sarraf said. ONGC would be competing with private oil companies to develop these fields. The government hopes to attract private and foreign bidders to the auction despite an oil price crash that has discouraged many firms from taking up new projects. A lower oil price has also resulted in a sharp reduction in the oilfield services rates, bringing down field development costs and might spur investments in some cases.
ONGC, in the meantime, is also spending heavily on developing its other fields, earmarking about `35,000 crore in capital expenditure for the current fiscal year. “We believe that this is the best time to invest because costs are lower. We must understand that crude oil and gas prices are cyclical,“Sarraf said, while admitting that at current gas prices, developing deep water blocks is ‘challenging’.
Sarraf said the dispute between ONGC and Reliance Industries over the exploitation of the company's gas reserve in the KG Basin can get resolved only after the consultant appointed to investigate the matter submits its report by October. “If the report says our reserves are not contiguous with Reliance's, that means our reserves are intact,” Sarraf said. The court has asked the government to resolve the issue within six months of receiving the consultant's report. ONGC had earlier accused Reliance of drawing gas from its reserve. ONGC's overseas arm, ONGC Videsh, is, meanwhile, on course to meet its production target of 20 million metric tonne of oil equivalent (MMtoe) by 2018-19, its managing director said, banking mainly on the recent stake buy in a Russian field, hopes of receiving the rights to develop Farzad field in Iran, and more acquisitions.
“We will be able to meet our targets,” NK Verma, managing director, said. In the last fiscal year, ONGC Videsh produced 8.87 MMtoe, barely 6% more than in 2013-14. But a 15% stake purchase for $1.27 billion in the Vankor field in Russia, announced recently will substantially add to the company's current year production. Its share from the Vankor field will be about 66,000 barrels daily, almost 40% of ONGC Videsh's total output, Verma said.
ONGC Videsh is also hoping to get the rights to develop and produce from the Farzad field in Iran. The company has submitted an integrated development plan for the field, including the production and the evacuation plan, to the Iranian authorities, Verma said, adding that the Iranian officials will be in India in a couple of weeks to discuss the fine print. If ONGC Videsh gets to develop these fields, it would take 3-4 years to bring it to production.
The company is also planning to acquire more assets overseas as falling oil prices have made available assets cheap and there is a government push to gain increased access to overseas assets for the country's energy security.
“This is the right time. And we will continue to evaluate opportunities for acquisition in the right locations,“Verma said.
ONGC Videsh currently has 36 projects in 17 countries across the globe. About 13 of these projects are already producing.
ONGC VIDESH IS ALSO HOPING TO GET THE RIGHTS TO DEVELOP AND PRODUCE FROM THE FARZAD FIELD IN IRAN